The Issue is Air Service

LANSING, MI - This year’s annual National Air Service Conference, hosted here by the American Association of Airport Executives (AAAE) and its Great Lakes Chapter, drew some 75 attendees and included a comprehensive agenda focused on flushing out the challenges and best practices related to enhancing and sustaining passenger air service.

Hot topics included gaining credibility as an air service development professional, presenting airport markets to air carriers, airline economics, and capacity discipline.

Coinciding with the Air Service Conference was the Ground Handling Initiatives Workshop, which outlined how to create efficient and cost-effective ground handling services (both above and below the wing). Attendees of the workshop discussed options airport operators have regarding the provision of ground service operations through the airport operator, FBOs, airport/airline service companies, or through partnerships formed by the airport, carriers, and ground service industry.

Gaining credibility; presenting the market

When it comes to discussing the possibility of adding service by a new carrier, panelists stress the importance of knowing the airline partner’s business model, and being able to relate the value of a particular airport market beyond what the carrier may already know.

Says Justin Meyer, air service development manager at Kansas City International Airport, “Having been on the airline side of the table, I can tell you the airlines want to know how every piece of data you present can be useful to them.

“Don’t show them that Wal-Mart is your top employer; don’t tell them about McDonald’s, the hospital, the school district, the post office ... because the propensity to travel for those employees is not as high as what you want to be communicating; tell them what companies are headquartered in your region, or who has large offices there.”

Expense forecasts are really difficult, relates DiFore, because an airline’s expenses can never really be understood completely. “Most carriers say to leave expenses out, and focus on the revenue,” he says.

“The problem is if you’re way off with your forecast, you have totally sabotaged your credibility on the rest of the presentation.”

For presentations to carriers, use standard font sizes and styles, adds DiFore. “It doesn’t reflect on the quality of the analysis but it reflects on the professionalism of the organization; you should always focus on maintaining a consistent style,” he says.

“Every market has a story ... no airline planner should know your market better than you. Turn the data into analysis; that’s the key.”

Adds Meyer, “One of the most important pieces in achieving and maintaining credibility is in knowing what service has the potential to work, and what is likely to not work, and to be able to communicate that clearly to the carrier. It’s critical to be able to step back and say, this does not likely have the potential to succeed at this given point in time.

“You are still building relationships; what may not make sense for a particular carrier could make great sense for another, and should that air service professional end up at another airline in five years, you’ve got a head start in that relationship. People in this business move around, and your credibility will travel with them.”

Load factors tell a very small part of the story, explains InterVISTAS Consulting’s Kevin Schorr. “[Load factors] are always relative. You need to know if there’s enough revenue on the plane to cover the costs; load factor doesn’t really say that. Southwest and Allegiant can get away with a much lower load factor than Delta or US Airways, for example.

On gaining specific passenger data about a particular market, Schorr says in smaller communities, it’s often helpful to talk to travel companies. “They may know exactly who’s flying where and when, how they’re getting there, how much they’re paying, and if people are driving to another airport to get there.”

He adds, “Air service development isn’t only about new service; focus on existing service as if it could be pulled at any minute.”

Think big-picture; be adaptable

Says John DeCoster, senior VP at Trillion Aviation, “The airline speech hasn’t changed; something for airports that is important to understand is that you will hear a lot of the same stuff you’ve heard over the years, but you have to attack it differently that you’ve done before.

“You have things like non-airline revenue that has to grow. An airline will typically tell you that they want to pay about 25-30 percent of your operating budget with rates and charges. Some are 60; it’s imperative that airports have a strategy of how to get there.

“You’re actually going to be expected to run your airports as businesses; with entrepreneurialship comes risk. I totally agree with approaching things as if you’re going to lose your service tomorrow.”

Things are changing and airports need to be adaptable and be thinking of the big-picture plan, says DeCoster. “There is a little bit more of an effort right now for airlines to be partners with airports,” he explains.

On ground handling, DeCoster says there are some airlines out there that have realized that when there is only three or four flights per day, or in the case of Sun Country or Allegiant, two, three, or four flights per week ... they cannot afford the cost of the infrastructure like a legacy carrier would, so airports have to have something on the table for them.

Greg Donovan, director at the Northwest Florida Regional Airport, says it’s incumbent upon the airport to mine information and data that goes beyond what is regularly available, such as O&D data; current yield, flow. That was the dilemma for several years at Northwest Florida, he relates.

“We approached Vision Airlines and shared with them specific data that we had on the hotel industry,” comments Donovan. “The airport played the ambassador role to quantify what was taking place in the hotel industry; from an airport and airline standpoint ... there was no data on this before.

“The end result was we obtained 17 cities; it is really taking off. The airlines don’t have the data that you have at the local community level; we had the hotels help us create the dialogue and data that was necessary to win this.”

Donovan says the airport asked, ‘What do we need to do to get the right kind of service that we know we can support?’

“The bottom line answer is to have the right amenities in place,” explains Donovan. “We are doing a shared-gate process; Vision didn’t have enough frequency initially to warrant having a dedicated gate, so we started going to the shared-use concept.

“We look at our non-aeronautical revenue sharing, and we are looking at things like convenient stores and gas stations because there aren’t any close by; we share more than 60 percent of our non-aeronautical revenue with the airlines to keep the cost per enplaned passenger down.”

Capacity discipline; fleet trends

Says Seabury’s Mike Lopez, “Capacity discipline is sort of this new buzz term that carriers are using. For the first time in a long time where things used to be a lot more about picking up market share and adding capacity to bring in that share ... that gets expensive when oil is at $120 per barrel ... carriers have really gotten onboard with trying to be more reasonable with capacity.”

Carriers are being very responsible in terms of when they are flying, and what they are flying, says general manager for network planning at Delta Air Lines, Anthony Canitano. “The capacity reductions don’t necessarily mean that across the board, everyone is going to lose 5 percent of their seats. There’s utilization flying that carriers do, and there are seasonal demands; so I think the carriers are getting more agile to identifying when the market is there and when it’s not.”

On the question of whether or not 50-seat regional jets (RJs) are a dying breed, Lopez remarks, “Oil where it’s at, it’s becoming increasingly difficult to work with that airplane from a planning perspective. Carriers are going to get more aggressive with pulling some of that capacity out, but the RJs won’t disappear.”

Canitano agrees, stating, “They are going to be around, but I think what you are going to see is RJs across the industry being allocated differently. I don’t think you’re going to be seeing the 1,300 mile RJ flight any longer. Instead of trying to have three or four flights on that stage length, [carriers] are going to try and do two with potentially larger aircraft.

“So there’s going to be some tradeoffs. I think what you’ll see is the RJ move back towards it’s intended role, which is it will connect from small and medium-sized communities into the bigger hubs, and it’s going to be shorter haul.”